Greater New York continues to be a red-hot real estate market worldwide, despite its affordability issues and high building costs. While many would think about the metro as a market approaching saturation, there are areas that experienced developers describe as emerging submarkets.

HAP Investments found success in New York by leveraging land in neighborhoods that were overlooked by other investors. The company was among the first developers in East Harlem and Jersey City’s Journal Square, after fruitful ventures in Europe and the Middle East. HAP Co-Founder & CEO Eran Polack discussed the company’s strategy and newest projects, and named New York City’s hottest submarkets in the interview below.

HAP Investments was one of the first developers to recognize the investment potential of emerging neighborhoods like East Harlem in Manhattan and Journal Square in Jersey City, N.J. What was the strategy behind this?

Polack: When we established our U.S. office, we identified emerging neighborhoods with long-term potential that we could invest and develop in for the next 20 to 30 years. Our goal was to build multiple projects here and strategically position ourselves to build a business around it.

We identified these neighborhoods as strong investment opportunities for multifamily development for multiple reasons—we could build quality projects with great amenities for less and offer more affordable rents. The projects were situated near public transportation, providing residents with an easy commute to and from the center of Manhattan.

How has the New York multifamily sector changed since you entered the market in 2010?

Polack: Manhattan land prices have increased considerably along with the cost of construction. Higher pricing coupled with the expiration of the 421-a tax exemption program, resulted in less multifamily development. The focus for developers was all condo, condo, condo. Many developers started pursuing strategically located multifamily projects in the outer boroughs, where land prices were more affordable compared to Manhattan. This created a major development boom in Brooklyn and Queens.

What are the most prominent trends in the New York City multifamily business?

Polack: In order to attract tenants, it has become standard for new multifamily buildings to offer amenities, higher quality finishes and unique features. The latest crop of rental projects in New York City are providing these new offerings that were typically found in pricey condo buildings, setting the bar for renter expectations.

What New York City submarkets should we keep an eye on and why?

Polack: Washington Heights is one of the city’s most talked about, up-and-coming spot. It’s located in northern Manhattan, away from dense crowds, providing a quieter pace of life with a true neighborhood feeling. Northern Manhattan has become a fast-moving real estate market with a lot of activity taking place in Harlem and East Harlem. We believe Washington Heights is the next frontier.

Affordable housing—or the lack of it—is one of the market’s downsides. What are the most pressing challenges related to it and how does HAP Investments approach them?

Polack: It’s challenging to develop affordable housing projects in New York today because of higher land and construction pricing but I believe the new Affordable New York program will help. The program is good for the community, the city and the developer, creating a win-win for all sides.

We have experience developing 80/20 rental buildings in emerging neighborhoods and know how to properly structure and monetize affordable housing projects. With this new program, we are actively looking to develop more rental projects in East Harlem and Washington Heighs and we are also interested in the Bronx and Brooklyn.

Tell us about the company’s development pipeline in New York City. Any project you would like to zero in on?

Polack: HAP’s longstanding strategy has always focused on developing projects in both emerging and prime neighborhoods throughout the New York metropolitan area. We currently have a 42-story luxury rental project at 500 Summit Ave., located in the rapidly growing Journal Square neighborhood of Jersey City. The property will offer sweeping views of the New York City skyline and convenient access to the PATH train into downtown Manhattan. We are also developing a 129-unit mixed-used project at 4452 Broadway, in northern Manhattan’s Fort George.

Today, we are investing in high-end markets such as Chelsea with our project at 215-225 W. 28th St. and in Tribeca at 65 Franklin St. We plan to build full-service luxury rental and condominium developments boasting a full suite of amenities, as they are highly desirable and stable. We believe there is still a lot of growth potential.